China’s real GDP grows 4.9% in July-September

China’s National Bureau of Statistics (NBS) released its gross domestic product (GDP) for July~September 2023 on October 18, with real GDP growth of 4.9% year-on-year after excluding price changes. The growth rate slowed down from 6.3% in April to June (the same period of the previous year when Shanghai was closed and the comparative base was low).

While production showed signs of picking up, the decline in the real estate market widened. Year-on-year growth in July~September was higher than the average of market expectations (4.4%) surveyed by Nihon Keizai Shimbun and Nikkei QUICK News.

Adjusted for seasonal factors, the 1.3% increase from the previous quarter was higher than that of April to June (0.5%). If converted to an annual growth rate as in developed countries, it is about 5.3%. Nominal GDP, which is close to the real feeling of life, increased by 3.5% compared to the same period last year. The increase in April to June was 4.8%.

In conjunction with GDP, other statistics were released. Industrial production increased by 4.0% from January to September. Compared with January to June (3.8%), the growth rate accelerated. Inventory adjustments improved factory utilization.The manufacturing Purchasing Managers’ Index (PMI) for September showed strong production, with new orders increasing in the automotive and electrical machinery sectors.

Total retail sales of consumer goods (retail sales), which include sales at department stores, supermarkets, and Internet sales, rose 6.8% from January to September. This was narrower than the growth rate in January to June (8.2%).

From January to September, investment in fixed assets, including factory construction, increased by 3.1% compared with the same period last year. This is a slowdown from the 3.8% increase in January through June. Private sector investment declined by 0.6%.

The real estate market has been in a prolonged slump. Development investment fell 9.1% in January-September. This was a bigger drop compared to the 7.9 percent drop in January to June. The area of new homes sold also fell by 6.3%, widening the scope of negative growth. It will take time to digest the stock and more new properties will take time to appear.

In terms of trade with other countries, China’s exports fell significantly. In dollar terms, they were down 10% from July to September compared to the same period last year. Imports also declined due to weak domestic demand, but exports fell sharply and the trade surplus (exports minus imports) fell by 13%. This was the first negative growth in three quarters.

Real GDP grew by 5.2% from January to September. It exceeded the 2023 growth target of around 5%. However, private sector earnings and employment are improving slowly and uncertainty remains. The International Monetary Fund (IMF) predicted China’s economic growth rate in 2024 to be 4.2 percent in its Economic Outlook released on October 10th. This is 0.3 percentage points lower than the July forecast. Many views are cautious about China’s economy.